18 February 2014
Australasian private equity: leading the way in a changing market
The Australia and New Zealand private equity industry remains cautiously optimistic about the prospects for 2014, with concerns about an economy that is slowing in the aftermath of a decade-long mining boom counterbalanced by a recovery in public market exits. At the same time, there appears to be greater clarity regarding superannuation funds’ commitment to the asset class.
The upcoming AVCJ Australia & New Zealand Forum, to be held in Sydney on March 6-7, will hear leading global and local players discuss expectations in terms of investment activity and returns, the changing private equity landscape domestically and overseas, and the implications for manager selection.
Australia’s economic growth slowed in 2013, largely due to easing commodities demand, but household savings also remain resolutely high, which doesn’t bode well for non-mining businesses.
Private equity investment in Australia and New Zealand, meanwhile, came in at $11.6 billion, down slightly on the previous year, but one sizeable infrastructure deal accounted for a large portion of that sum. Above the lower middle market space, there was a noticeable drop-off in activity, blamed on reduced deal flow and a lack of value in the market.
Exits have provided some cause for cheer, with private equity-backed IPOs on the Australia and New Zealand bourses generating proceeds of $3.1 billion in 2013, according to AVCJ Research, the highest annual total on record. The IPO window is expected to remain open well into 2014.
“Australasian private equity faces numerous headwinds – not least those tied to broader economic trends – but the public exits market has picked up, offering investors much needed liquidity. There are also signs that uncertainty about superannuation funds’ continued support of private equity has abated, with a number of funds showing renewed interest in the asset class,” said Tim Burroughs, managing editor of Asian Venture Capital Journal.
Many superannuation funds that have seen strong returns from their alternatives programs in recent years and there is increasing appetite for direct exposure to private assets, either through co-investments with PE funds or through infrastructure deals that offer long term, stable returns. Real assets remain a highly attractive area, due to the need for structural development and improved infrastructure in the region.
Further investment and exit activity will arise from the gradual integration of Australia and New Zealand into the wider Asian region. Portfolio companies can seek new growth opportunities in emerging markets, while M&A interest from the likes of China, Japan and South Korea is well established and expected to proliferate.
Peter Wiggs, CEO of Archer Capital stated that the outlook for Australian PE continues to steadily improve from the lows of 2008/09 with a steady improvement in both new deal activity and profitable cash on cash realisations.
About Asian Venture Capital Journal:
Asian Venture Capital Journal (AVCJ) is a renowned magazine and online journal covering the private equity industry in Asia. It has been holding events in the region for more than 20 years, including the Hong Kong Forum, the largest gathering of institutional investors in Asia. The firm has kept pace with the development of the industry over the years by offering country-specific events across the Asia Pacific region.
For more information, please visit www.avcjausnz.com.
For a media pass to attend the AVCJ Australia & New Zealand Forum 2014, please contact:
Simrita Virk, Shed Media
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Audrey Reisdorffer, Incisive Media,
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